Speech in the Senate by Sen. Bill First (R-TN). Re: Telecommunications Act of 1996. Date: June 20, 2001. Source: Congressional Record, June 20, 2001, page S6515.

Mr. FRIST . Mr. President, I am increasingly concerned about the stalled promise of the Telecommunications Act of 1996 . There are many indications that the pro-competitive course we charted in 1996 when we enacted the Telecommunications Act is not moving as quickly as we intended. In response to that landmark law, hundreds of companies invested billions of dollars in an effort to bring a choice of service provider to local consumers. Yet the competitive telecommunications industry has virtually collapsed in the past year. Every day brings reports of competitors declaring bankruptcy, shutting down operations, or scaling back plans to offer service. Even in my home State, five competitive local exchange carriers with major operations in Tennessee have gone bankrupt.

We have all read recent reports of the difficulties that competitive telecommunications firms are facing in the current economic downturn. For those that continue to struggle in operation, stock prices have plunged, and the capital market has virtually dried up. While telecommunications companies captured an average of two billion dollars per month in initial public offerings over the last two years, they raised only $76 million in IPOs in March, leading numerous companies to withdraw their IPO plans.

The difficulty in entering local markets has also caused nearly all competitors to scale back their plans to offer service. Covad had established offices in Chattanooga, Knoxville, Memphis and Nashville, but is now closing down over 250 central offices, and will suspend applications for 500 more facilities. Rhythms has cancelled plans to expand nationwide. Net2000 has put its plans for expansion on hold. Numerous other competitors, such as DSL.net , have resolved to focus on a few core markets. Each of these decisions has been accompanied by hundreds of eliminated jobs. In all, competitive local carriers dismissed over 6500 employees nationwide in the last year while attempting to remain in business. Tennessee is among the hardest hit States.

The repercussions of these events on consumers is significant. Competitors reinvested most of their 2000 revenues in local network facilities. Competitors that declared bankruptcy in 2000 had planned to spend over $600 million on capital expenditures in 2001. Those competitive networks will not be available to consumers.

In this uncertain financial climate, it is imperative that we maintain a stable regulatory framework. The 1996 Telecom Act established three pathways to a more competitive local telecommunications marketplace: a new entrant could purchase local telephone services at wholesale rates from the incumbent and resell them to local customers; a competitor could lease specific pieces of the incumbent's network on an unbundled basis, using what the industry calls unbundled network elements; or a competitor could build its own facilities and interconnect them with the incumbent's network. Each of these alternatives must remain available to new entrants. Making fundamental changes to the structure of the 1996 Act will destabilize the already shaky competitive local exchange industry, depriving consumers of even the prospects for meaningful choice.

Recent press reports indicate that investors will not sink more money into local competitors when there is a ``growing view that regulators are working against the new entrants.'' We need to ensure that the market-opening requirements of the 1996 Act are vigorously implemented. Without a supportive regulatory environment, there will be no more capital flowing to new entrants in the local telecommunications market spurring competition and lower consumer prices. This was not the promise of the Telecommunications Act I voted for in 1996 .